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Table of Contents

Topic Sub-Topics Page

I. Introduction to Contracts A. What is a Contract? B. 1

Sources of Contract Law C.
Types of Contracts

II. Offer and Acceptance A. The Offer B. The 3

Acceptance C. Termination of
Offers

III. Consideration A. What is Consideration? B. 6

Sufficiency vs. Adequacy C.
Exceptions to Consideration

IV. Defenses to Contract A. Incapacity B. Duress C. 8

Formation Undue Influence D.
Misrepresentation E. Mistake
F. Illegality

V. Statute of Frauds A. Contracts Within the Statute 11

B. Satisfying the Statute C.
Exceptions

VI. Terms of the Contract A. Parol Evidence Rule B. 13

Interpretation of Terms C.
Implied Terms

VII. Conditions and A. Conditions B. Performance 15

Performance C. Breach of Contract

VIII. Remedies for Breach A. Damages B. Specific 18

Performance C. Rescission
and Restitution

IX. Third-Party Rights A. Third-Party Beneficiaries B. 21

Assignment and Delegation

X. Discharge of Contracts A. Mutual Rescission B. 23

Novation C. Accord and
Topic Sub-Topics Page

Satisfaction D. Impracticability
and Frustration of Purpose

I. Introduction to Contracts

A. What is a Contract?
●​ A legally enforceable agreement between two or more parties.
●​ Key elements: offer, acceptance, consideration, legal capacity, and legal purpose.

B. Sources of Contract Law

●​ Common Law: Primarily governs contracts for services, real estate, and intangible
goods. Derived from judicial decisions.
●​ Uniform Commercial Code (UCC) Article 2: Governs contracts for the sale of
goods (tangible, movable items). Adopted by states to standardize commercial
transactions.

C. Types of Contracts
●​ Express Contracts: Formed by words (oral or written).
●​ Implied-in-Fact Contracts: Formed by conduct.
●​ Quasi-Contracts (Implied-in-Law): Not true contracts; imposed by courts to
prevent unjust enrichment.
●​ Unilateral Contracts: An offer that can only be accepted by performance.
●​ Bilateral Contracts: An offer that can be accepted by a promise to perform.

II. Offer and Acceptance

A. The Offer
●​ Definition: A manifestation of willingness to enter into a bargain, made in such a
way that another person is justified in understanding that his assent to that bargain
is invited and will conclude it.
●​ Elements of a Valid Offer:
○​ Intent: Must show objective intent to be bound. Not mere preliminary
negotiations, advertisements (generally), or jokes.
 ○​ Definiteness and Certainty: Terms must be clear enough for a court to
determine if a breach occurred and to award a remedy. Key terms include
parties, subject matter, price, and time of performance.
○​ Communication: Must be communicated to the offeree.

B. The Acceptance
●​ Definition: A manifestation of assent to the terms of the offer, made by the offeree
in a manner invited or required by the offer.
●​ Who Can Accept? Only the person to whom the offer was directed or who was
reasonably intended to be an offeree.
●​ Method of Acceptance:
○​ Bilateral Contracts: Acceptance by promise (express or implied).
○​ Unilateral Contracts: Acceptance by complete performance.
○​ Silence as Acceptance: Generally, silence is not acceptance, except in
limited circumstances (e.g., prior dealings, custom, or where the offeree
takes benefit of services with reasonable opportunity to reject).
●​ Mirror Image Rule (Common Law): Acceptance must precisely mirror the terms of
the offer; any deviation is a counteroffer.
●​ UCC § 2-207 (Battle of the Forms): Modifies the mirror image rule for contracts
involving the sale of goods.
○​ A definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time operates as an
acceptance even though it states terms additional to or different from those
offered or agreed upon, unless acceptance is expressly made conditional
on assent to the additional or different terms.
○​ Between merchants, additional terms become part of the contract unless:
■​ The offer expressly limits acceptance to the terms of the offer.
■​ They materially alter it.
■​ Notification of objection to them has already been given or is given
within a reasonable time after notice of them is received.
○​ Different terms: Jurisdictions vary (some use "knock-out" rule, others treat
as proposals).
●​ Mailbox Rule: Acceptance is generally effective upon dispatch (when sent),
provided it is sent by an authorized means of communication.
○​ Applies to non-instantaneous forms of communication.
○​ Does not apply to option contracts.
○​ Offer, rejection, and revocation are generally effective upon receipt.

C. Termination of Offers
●​ Lapse of Time: After a stated time or a reasonable time.
●​ Revocation by Offeror: Offeror can revoke an offer before acceptance.
 ○​ Generally effective upon receipt by the offeree.
○​ Irrevocable Offers:
■​ Option Contract: A separate contract to keep an offer open for a
specified period, supported by consideration.
■​ UCC Firm Offers (2-205): An offer by a merchant to buy or sell
goods in a signed writing which by its terms gives assurance that it
will be held open is not revocable, for lack of consideration, during
the time stated or if no time is stated for a reasonable time, but in no
event may such period of irrevocability exceed three months.
■​ Detrimental Reliance (Promissory Estoppel): If the offeree
reasonably and foreseeably relies on the offer to their detriment, the
offer may become irrevocable.
■​ Part Performance of a Unilateral Contract: Once performance has
begun, the offer becomes temporarily irrevocable, allowing the
offeree a reasonable time to complete performance.
●​ Rejection by Offeree: Offeree declines the offer. Effective upon receipt.
●​ Counteroffer by Offeree: A rejection of the original offer and a new offer.
●​ Death or Incapacity of Either Party: Terminates the offer (unless it's an option
contract).
●​ Destruction of the Subject Matter: Terminates the offer.
●​ Supervening Illegality: If the subject matter of the offer becomes illegal.

III. Consideration

A. What is Consideration?
●​ Definition: Something of legal value (a bargained-for exchange) given by each
party to a contract. Each party incurs a legal detriment and receives a legal
benefit.
●​ Bargained-for Exchange: The promise induces the detriment, and the detriment
induces the promise.
●​ Legal Detriment: Doing something one is not legally obligated to do, or refraining
from doing something one has a legal right to do.

B. Sufficiency vs. Adequacy

●​ Sufficiency: Refers to the legal validity of consideration (i.e., whether it constitutes
a legal detriment). Courts generally require sufficient consideration.
●​ Adequacy: Refers to the fairness of the exchange. Courts generally do not inquire
into the adequacy of consideration, as long as it is sufficient.
C. Exceptions to Consideration
●​ Promissory Estoppel (Detrimental Reliance): A promise is enforceable without
consideration if:
a.​ The promisor made a clear and unambiguous promise.
b.​ The promisee reasonably and foreseeably relied on the promise.
c.​ The promisee suffered a detriment as a result of the reliance.
d.​ Injustice can only be avoided by enforcing the promise.
●​ Moral Obligation: Generally not consideration, but some jurisdictions enforce
promises made in recognition of a prior benefit, especially if the promise is in
writing.
●​ Statute of Limitations: A new promise to pay a debt barred by the statute of
limitations is enforceable without new consideration.
●​ Promises to Pay Debts Discharged in Bankruptcy: Enforceable without new
consideration if certain conditions are met.
●​ Charitable Subscriptions: Often enforced without consideration, particularly if the
charity incurs obligations in reliance on the promise.
●​ Waiver of a Claim: A waiver of a legal right or claim can serve as consideration.
●​ UCC Modifications (2-209): An agreement modifying a contract for the sale of
goods needs no consideration to be binding. However, modifications must be
made in good faith.

IV. Defenses to Contract Formation

A. Incapacity
●​ Minors: Contracts entered into by minors (under 18) are generally voidable at the
minor's option.
○​ Ratification: A minor can ratify a contract upon reaching majority (expressly
or by conduct).
○​ Necessaries: Minors are liable for the reasonable value of necessaries
(food, shelter, clothing, medical care).
●​ Mental Incapacity:
○​ Cognitive Test: Person unable to understand the nature and consequences
of the transaction.
○​ Volitional Test: Person unable to act in a reasonable manner in relation to
the transaction, and the other party has reason to know of the condition.
○​ Contracts are generally voidable by the incapacitated person.
●​ Intoxication: If a person is so intoxicated that they cannot understand the nature of
the transaction and the other party knows or has reason to know of the
intoxication, the contract may be voidable.
B. Duress
●​ Definition: Improper threat that deprives a party of meaningful choice.
●​ Elements:
○​ Improper threat (e.g., threat of physical harm, criminal prosecution, breach
of contract in bad faith).
○​ No reasonable alternative.
○​ Inducement of assent.
●​ Effect: Contract is voidable.

C. Undue Influence
●​ Definition: Unfair persuasion by a person in a dominant position (e.g., trust,
confidence, authority) over a subservient party.
●​ Elements:
○​ A relationship of trust and confidence, or dominance.
○​ Unfair persuasion (e.g., discussing the transaction at an unusual time or
place, multiple persuaders, absence of independent advice).
●​ Effect: Contract is voidable.

D. Misrepresentation
●​ Fraudulent Misrepresentation (Intentional):
○​ False statement of material fact.
○​ Knowledge of falsity (scienter) or reckless disregard for the truth.
○​ Intent to induce reliance.
○​ Justifiable reliance by the other party.
○​ Damages.
○​ Effect: Contract is voidable, and damages may be available.
●​ Non-Fraudulent Misrepresentation (Negligent or Innocent):
○​ False statement of material fact.
○​ Negligent (lack of reasonable care) or innocent (no fault) belief in the truth
of the statement.
○​ Justifiable reliance.
○​ Damages (for negligent).
○​ Effect: Contract is voidable; damages may be available for negligent
misrepresentation, but usually not for innocent misrepresentation.

E. Mistake
●​ Mutual Mistake:
○​ Both parties are mistaken about a basic assumption of fact.
○​ The mistake is material (goes to the essence of the contract).
 ○​ The party seeking to avoid the contract did not bear the risk of the mistake.
○​ Effect: Contract is voidable.
●​ Unilateral Mistake:
○​ One party is mistaken about a basic assumption of fact.
○​ The mistake is material.
○​ The mistaken party did not bear the risk of the mistake.
○​ The non-mistaken party knew or had reason to know of the mistake, OR the
mistake was so severe that enforcing the contract would be
unconscionable.
○​ Effect: Contract is voidable in certain circumstances.

F. Illegality
●​ If the purpose or subject matter of the contract is illegal, the contract is generally
void and unenforceable.
●​ Examples: Contracts to commit a crime, usurious contracts, contracts in restraint
of trade (unless reasonable).
●​ Severability: If the illegal part can be separated from the legal part, the legal part
may be enforced.

V. Statute of Frauds

A. Contracts Within the Statute

●​ Requires certain types of contracts to be in writing to be enforceable.
●​ MY LEGS:
○​ Marriage: Promises made in consideration of marriage (e.g., prenuptial
agreements).
○​ Year: Contracts that cannot by their terms be performed within one year
from the date of formation.
○​ Land: Contracts for the sale of an interest in land (e.g., sales, leases,
mortgages, easements).
○​ Executor/Administrator: Promises by an executor or administrator to pay the
estate's debts from their own personal funds.
○​ Goods: Contracts for the sale of goods for $500 or more (UCC § 2-201).
○​ Suretyship: Promises to answer for the debt or duty of another (collateral
promise).

B. Satisfying the Statute

●​ Common Law: The writing must:
○​ Identify the parties.
 ○​ Identify the subject matter.
○​ Contain the essential terms.
○​ Be signed by the party against whom enforcement is sought.
●​ UCC § 2-201 (Sale of Goods): The writing must:
○​ Indicate that a contract for sale has been made between the parties.
○​ Specify the quantity of goods.
○​ Be signed by the party against whom enforcement is sought.
○​ Price and time of delivery need not be stated.

C. Exceptions
●​ Part Performance (Land Contracts): If a party has:
a.​ Paid part or all of the purchase price.
b.​ Taken possession of the land.
c.​ Made substantial improvements to the land.
○​ Two out of three usually suffice.
●​ Promissory Estoppel: Some courts will enforce an oral contract otherwise within
the Statute of Frauds if there was foreseeable and detrimental reliance on the
promise.
●​ UCC Exceptions (2-201):
○​ Specially Manufactured Goods: If goods are specially manufactured for the
buyer, are not suitable for sale to others, and the seller has made a
substantial beginning of their manufacture or commitments for their
procurement.
○​ Admission in Court: If the party against whom enforcement is sought
admits in court that a contract for sale was made.
○​ Payment or Delivery: If payment has been made and accepted, or goods
have been received and accepted.
○​ Merchant's Confirmatory Memo: Between merchants, if one sends a
written confirmation of an oral contract within a reasonable time, and the
recipient has reason to know its contents, it satisfies the Statute of Frauds
against the recipient unless they object within 10 days of receipt.

VI. Terms of the Contract

A. Parol Evidence Rule

●​ Definition: Prevents the introduction of extrinsic (oral or written) evidence of prior
or contemporaneous agreements to contradict, vary, or add to the terms of a fully
integrated written contract.
●​ Integration: Refers to whether the written contract is intended to be the complete
and final expression of the parties' agreement.
 ○​ Complete Integration: Intended to be the sole expression of the agreement.
○​ Partial Integration: Intended to be the final expression of the terms it
contains, but not necessarily all terms.
●​ Exceptions to the Rule (Evidence May be Admitted):
○​ To explain or interpret ambiguous terms.
○​ To show that a contract was never formed (e.g., lack of consideration,
fraud, duress).
○​ To establish a defense to enforcement (e.g., illegality, mistake).
○​ To show a condition precedent to the contract's effectiveness.
○​ To show a subsequent modification of the contract (new agreement).
○​ To show a course of dealing, usage of trade, or course of performance
(especially under the UCC).
○​ To correct a clerical error or obvious mistake.

B. Interpretation of Terms
●​ Plain Meaning Rule: Courts generally give words their ordinary and customary
meaning.
●​ Context: Terms are interpreted in the context of the entire contract.
●​ Contra Proferentem: Ambiguous terms are construed against the party who
drafted the contract.
●​ Hierarchy of Terms (UCC):
a.​ Express terms.
b.​ Course of performance (repeated occasions for performance under the
same contract).
c.​ Course of dealing (prior conduct between the parties to other contracts).
d.​ Usage of trade (practice or method of dealing regularly observed in a place,
vocation, or trade).

C. Implied Terms
●​ Implied-in-Fact: Terms understood by the parties but not explicitly stated.
●​ Implied-in-Law: Terms imposed by law, regardless of the parties' intent, to
achieve justice.
○​ Implied Covenant of Good Faith and Fair Dealing: Present in every
contract, requiring parties to act honestly and reasonably.
○​ UCC Implied Warranties:
■​ Implied Warranty of Merchantability (2-314): Goods sold by a
merchant are fit for their ordinary purpose.
■​ Implied Warranty of Fitness for a Particular Purpose (2-315): Seller
knows buyer's particular purpose and that buyer is relying on seller's
skill/judgment.
VII. Conditions and Performance

A. Conditions
●​ Definition: An event, not certain to occur, which must occur (unless its
non-occurrence is excused) before performance under a contract becomes due.
●​ Types of Conditions:
○​ Condition Precedent: An event that must occur before a party's duty to
perform arises.
○​ Condition Concurrent: An event that must occur simultaneously with
another party's performance (e.g., payment and delivery in a cash sale).
○​ Condition Subsequent: An event that, if it occurs, discharges a duty of
performance that has already arisen.
●​ Express Conditions: Explicitly stated in the contract. Must be strictly complied
with.
●​ Implied Conditions: Inferred by the court from the parties' conduct or the nature
of the contract.
●​ Excuses of Conditions:
○​ Waiver: A party voluntarily gives up their right to insist on a condition.
○​ Estoppel: A party is estopped from asserting a condition if they led the
other party to believe the condition would not be insisted upon, and the
other party reasonably relied.
○​ Prevention: A party cannot prevent the fulfillment of a condition and then
use the non-fulfillment as a defense.
○​ Unjust Forfeiture: Courts may excuse a condition if its enforcement would
result in disproportionate forfeiture.

B. Performance
●​ Order of Performance: Unless otherwise agreed, performance of conditions
concurrent occurs simultaneously. If one party's performance takes time, it is
generally due before the other's.
●​ Common Law - Material Breach Rule:
○​ Substantial Performance: If a party substantially performs their obligations,
the other party must perform their part, but can sue for damages for the
minor breach.
○​ Material Breach: A breach so significant that it defeats the essential
purpose of the contract. The non-breaching party is discharged from their
own performance and can sue for total damages.
○​ Factors for Materiality: Amount of benefit received, adequacy of
compensation for damages, extent of part performance, hardship to the
breaching party, negligent or willful behavior.
 ●​ UCC - Perfect Tender Rule (2-601):
○​ For contracts for the sale of goods, the buyer can reject goods if they fail in
any respect to conform to the contract.
○​ Exceptions:
■​ Installment Contracts (2-612): Buyer can only reject an installment if
the non-conformity substantially impairs the value of that installment
and cannot be cured.
■​ Seller's Right to Cure (2-508): If the seller makes a non-conforming
tender, they may have a right to cure within the contract time or a
reasonable time if they reasonably believed the goods would be
acceptable.

C. Breach of Contract
●​ Anticipatory Repudiation: A clear and unequivocal indication by one party that
they will not perform their duties under the contract, before performance is due.
○​ Options for Non-Breaching Party:
i.​ Treat the repudiation as an immediate breach and sue for damages.
ii.​ Wait for performance date and then sue.
iii.​ Urge the repudiating party to perform.
iv.​ Cancel the contract.
○​ Retraction: A repudiating party can retract their repudiation unless the
non-breaching party has:
■​ Acted in reliance on the repudiation.
■​ Signified acceptance of the repudiation.
■​ Commenced an action for breach.
●​ Insecurity (UCC § 2-609): When reasonable grounds for insecurity arise regarding
either party's performance, the insecure party may demand in writing adequate
assurance of due performance. Until such assurance is received, the insecure
party may suspend any performance for which he has not already received the
agreed return. Failure to provide assurance within a reasonable time (not
exceeding 30 days) is a repudiation.

VIII. Remedies for Breach

A. Damages
●​ Purpose: To put the non-breaching party in the position they would have been in
had the contract been performed (expectation damages).
●​ Expectation Damages: The most common remedy. Measured by the loss in value
to the injured party caused by the other party's failure or deficiency in
 performance, plus any other incidental or consequential loss, less any cost or
other loss that the injured party has avoided by not having to perform.
○​ Direct Damages: Directly flow from the breach.
○​ Consequential Damages: Foreseeable losses that arise from the breach
because of the injured party's particular circumstances. Must be
foreseeable at the time of contract formation (Hadley v. Baxendale).
○​ Incidental Damages: Expenses incurred in responding to the breach (e.g.,
costs of inspecting, storing, or reselling rightfully rejected goods).
●​ Reliance Damages: If expectation damages are too speculative, the non-breaching
party can recover expenses incurred in reliance on the contract. Aims to put the
party in the position they were in before the contract was made.
●​ Restitution Damages: Aims to prevent unjust enrichment of the breaching party.
Recovered for any benefit conferred on the breaching party.
●​ Liquidated Damages: Damages whose amount the parties designate during the
formation of a contract for the injured party to collect as compensation upon a
specific breach.
○​ Enforceability Requirements:
i.​ Damages must have been difficult to ascertain at the time of contract
formation.
ii.​ The amount agreed upon must be a reasonable forecast of the
probable damages.
○​ If these requirements are not met, the clause is considered a penalty and is
unenforceable.
●​ Punitive Damages: Generally not available for breach of contract, unless the
breach also involves a tort (e.g., fraud).
●​ Mitigation of Damages: The non-breaching party has a duty to take reasonable
steps to minimize their damages. Failure to mitigate may reduce the amount of
recoverable damages.

B. Specific Performance
●​ Definition: A court order compelling the breaching party to perform their promise.
●​ Availability: Only when monetary damages are inadequate.
○​ Land Contracts: Real estate is unique, so specific performance is often
available.
○​ Unique Goods: (e.g., antiques, works of art, custom-made items).
○​ Personal Services Contracts: Generally not available, as it amounts to
involuntary servitude, but injunctions may be available to prevent a party
from performing similar services for a competitor.
●​ Requirements:
○​ Valid contract.
○​ Monetary damages are inadequate.
 ○​ Feasible for the court to enforce.
○​ Terms are sufficiently definite.
○​ No defenses (e.g., unclean hands, laches).

C. Rescission and Restitution

●​ Rescission: An action to undo or terminate a contract and return the parties to the
position they were in before the contract was made.
○​ Available when there is a valid reason to set aside the contract (e.g.,
mistake, fraud, duress, material breach).
●​ Restitution: The return of any benefit conferred on the breaching party, to prevent
unjust enrichment.
○​ Can be an alternative to expectation damages.
○​ Often accompanies rescission.

IX. Third-Party Rights

A. Third-Party Beneficiaries
●​ Definition: A person who is not a party to the contract but whom the contracting
parties intend to benefit.
●​ Types:
○​ Intended Beneficiary: A third party who was intended to benefit from the
contract and has rights under the contract.
■​ Creditor Beneficiary: The promisee intends the performance to
satisfy a debt owed to the beneficiary.
■​ Donee Beneficiary: The promisee intends to confer a gift on the
beneficiary.
○​ Incidental Beneficiary: A third party who benefits from the contract but
was not intended to be a beneficiary. Incidental beneficiaries have no rights
under the contract.
●​ Vesting of Rights: An intended beneficiary's rights vest when they:
a.​ Materially change their position in reliance on the promise.
b.​ Bring a lawsuit to enforce the promise.
c.​ Assent to the promise at the request of one of the parties.
●​ Defenses: The promisor can assert against the third-party beneficiary any
defenses they could have asserted against the promisee.

B. Assignment and Delegation

●​ Assignment of Rights: The transfer of contractual rights from one party (assignor)
to another (assignee).
 ○​ What can be Assigned? Generally, all contractual rights can be assigned,
unless the assignment:
■​ Materially alters the duties of the obligor.
■​ Is forbidden by law or public policy.
■​ Is expressly prohibited by the contract (anti-assignment clause).
○​ Notice: Notice to the obligor is advisable but not required for the
assignment to be effective between assignor and assignee. However, the
obligor is discharged if they perform for the assignor without notice of the
assignment.
○​ Revocability: Assignments for consideration are generally irrevocable.
Gratuitous assignments are generally revocable, unless evidenced by a
writing, or the assignee has relied.
●​ Delegation of Duties: The transfer of contractual duties from one party (delegator)
to another (delegatee).
○​ What can be Delegated? Generally, all contractual duties can be delegated,
unless the contract involves:
■​ Personal services (where the skill, reputation, or judgment of the
delegator is essential).
■​ A special trust.
■​ A substantial change to the obligee's expectations.
■​ A specific contractual prohibition against delegation.
○​ Effect: The delegator remains liable for performance, unless there is a
novation (a new agreement substituting a new party for an original party).
The delegatee is liable to the obligee only if they make a promise to perform
(express or implied) to the delegator or obligee.

X. Discharge of Contracts

A. Mutual Rescission
●​ An agreement by both parties to cancel the contract. Requires mutual assent and
consideration (the giving up of rights by each party).

B. Novation
●​ A new contract that substitutes a new party for one of the original parties, and
discharges the original contract. Requires:
a.​ A previous valid contract.
b.​ Agreement by all parties (original and new).
c.​ The complete extinguishment of the old obligation.
d.​ A new valid contract.
C. Accord and Satisfaction
●​ Accord: An agreement by the parties to accept some different performance in
satisfaction of the original contractual duty.
●​ Satisfaction: The actual performance of the accord.
●​ Once the accord is satisfied, the original duty is discharged. If the accord is not
satisfied, the non-breaching party can sue on either the original contract or the
accord.

D. Impracticability and Frustration of Purpose

●​ Impracticability: Occurs when an unforeseen event makes performance extremely
and unreasonably difficult or expensive.
○​ Elements:
i.​ An event occurs after contract formation.
ii.​ The event was not foreseeable at the time of formation.
iii.​ The event makes performance extremely and unreasonably difficult
or expensive.
iv.​ The party seeking discharge did not assume the risk of the event.
○​ Examples: Destruction of subject matter (if specifically identified), death or
incapacity of a unique person, a new law making performance illegal.
●​ Frustration of Purpose: Occurs when an unforeseen event renders the principal
purpose of the contract substantially valueless to one of the parties.
○​ Elements:
i.​ An event occurs after contract formation.
ii.​ The event was not foreseeable at the time of formation.
iii.​ The event completely or almost completely destroys the value of the
performance to one party.
iv.​ The party seeking discharge did not assume the risk of the event.
○​ Example: Renting a room to view a parade, and the parade is cancelled.